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MiFID II shines bright light on ETF trading says BlackRock

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BlackRock reports that investors turned to ETFs during Tuesday’s market volatility, with new MiFID II reporting rules shining a brighter light on trading activity.

The firm saw USD8.8 billion traded across the iShares EMEA range, and exchange volumes were equivalent to 340 per cent of the average daily volume.  By comparison, USD5 billion was traded on June 24th the day after the Brexit vote.

BlackRock writes that as a result of MiFID II post-trade requirements, all over-the-counter trades are now reported creating more visibility for investors. Of the USD8.8 billion traded on Tuesday, about half [USD4.9 billion] was off exchange but newly visible to investors.

The firm writes that ETF trading was orderly throughout Tuesday’s market volatility, amid heavy global volumes.

Stephen Cohen, Head of iShares EMEA at BlackRock says: “The challenge for many European investors looking to invest using ETFs has been the inability to get a full picture of trading activity.  MiFID II trade reporting requirements are changing all that, by shining a brighter light on where and how much ETFs are trading. As a result, we expect to see more investors building smart, modern portfolios using ETFs, both at the core and for tactical plays.”

Wei Li, Head of Investment Strategy, iShares EMEA commented on what ETF flow trends reveal about investor sentiment, and market outlook, saying: “Two-way flows in developed market equity ETFs suggest divergent investor views. As markets were falling some investors were scoping out ‘buy-on-dip’ strategies citing strong fundamentals. We believe the slide was mainly driven by an unwinding of popular trades betting on low equity volatility. The pullback could be an opportunity to add risk especially as stretched valuations had been a concern. We favour equities in Eurozone, Japan and emerging markets in this environment.”

The top three European iShares ETF trades by volume on Tuesday, 6th Feb were CSPX iShares Core S&P 500 UCITS ETF USD (Acc), with assets of USD25 billion and volume of USD370.0 million on that day.

The second was the SX5EEX iShares EURO STOXX 50 UCITS ETF (DE) with assets of USD12 billion and volume of USD349.4 million, while the third was IUSA iShares S&P 500 UCITS ETF USD (Dist), with assets of USD8 billion and a Tuesday volume of USD236.8 million.

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